Since education makes a person more likely to leave your region, how do you justify your investment in human capital?

Tuesday, October 27, 2009

Empire State Exodus: Taxes And Migration

The libertarians are at it again. The argument is that cutting taxes attracts people. The latest in a long line of policy experts making the same ridiculous claim is the Empire Center for New York State Policy:

What accounts for New York’s chronic inability to attract and retain more Americans than it loses every year? Any attempt to answer that question must begin with New York’s state and local tax burden, perennially ranked among the heaviest in the country. Taxes aside, likely explanations differ regionally. Downstate residents face high taxes and housing costs rated among the most “severely unaffordable” in the world. Land-use regulations in downstate New York also tend to inhibit growth. In upstate New York, housing is relatively inexpensive but even more heavily taxed, and new economic opportunities have been scarce.

Weather, on the other hand, seems less compelling as an explanation. After all, while the Sunbelt’s climate has long attracted northerners, cold winters haven’t stopped New Hampshire, Wisconsin and Minnesota from adding population while upstate New York has been shrinking.

This much is clear: with New York now facing the most serious fiscal and economic crisis in its modern history, government policies should be aimed at slowing down and ultimately reversing the state’s population drain.

That's the conclusion provided in the executive summary. Perhaps the actual report is a bit more compelling. But the overview plays fast and loose with the numbers. Net domestic migration isn't very useful for this kind of analysis. I know from experience that the IRS provides disaggregated data. Invoking the term "exodus" and then presenting net migration as evidence is the work of hucksters. The intent is to deceive, using the red herring of brain drain to achieve a certain policy end.

Still, despite all these trends, New York’s population rose 2.7 percent this decade, to 19.5 million people. The report says the top reason for that is a growing influx of foreign immigrants downstate.

Other researchers have reached different conclusions when studying migration patterns in New York.

The Federal Reserve Bank of New York, for instance, has found that while upstate has been experiencing a net loss of college-educated workers, it’s because of a low rate of people moving into New York—rather than an abnormally high rate of people leaving the state.

Out-migration rates are abnormally low, now more than in the recent past thanks to the Great Recession. That's hard to discern given slight of hand the Empire Center employs. Even the conclusion is confusing. Is cold weather Wisconsin growing population because of immigrants? Both Minnesota and Wisconsin are net migration losers. Shrinking states, in relocation terms.

The executive summary, designed for easy media consumption, is bullshit.

6 comments:

Jim, I'm curious to know why you hate net domestic migration (forget this study or the party affiliations of its sponsors). I generally have liked it. To me it seems to be a good signal as to whether people are "voting with their feet" to move to a place in greater numbers than they are leaving it.

I can't separate my issues with the metric from how it is used. That's the point. Brain drain is often understood as "exodus" or out-migration. But net domestic migration is the most commonly publicized number. Like any numbers, net migration can be useful. I don't hate the measure of net migration.

But let's say I have to choose between rates of out-migration, in-migration, or net migration. Urban economic health is all about attraction. The in-migration rate is more telling than the other two metrics. Net-migration doesn't really tell you if the city is a talent Hoover or not. You might have a relatively inert population, which indicates low educational attainment.

Another way to put it is to come to terms with the propensity of natives to think the grass is greener elsewhere. That's not voting with one's feet. That's just doing something that is as old as the dirt beneath our feet.

I wouldn't draw any conclusions from only net migration data. Unpack the numbers and drill down before making any claims. As Pittsburgh demonstrates, the concentration of talent can increase during a prolonged period of net out-migration. The city may be shrinking but it is also getting smarter.